Corporate News
Central Bank of Kenya Governor Njuguna Ndung’u (right), Communications
Authority of Kenya chairman Ngene Gituku (centre) and CAK
director-general Francis Wangusi during a media briefing on the thin-SIM
technology in the country yesterday. PHOTO | DIANA NGILA | NATION MEDIA
GROUP
By MARK OKUTTAH
In Summary
Telecoms operator Safaricom says it will review its legal commitments to M-Pesa customers who opt to use Equity Bank’s overlay SIM cards, pointing to a new battleground in the mobile money wars involving the two companies.
Safaricom’s warning follows a decision by the
telecommunications regulator to approve a one-year trial of Equity
Bank’s thin SIM cards in order to assess Safaricom’s security concerns.
The move could discourage money transfer service users anxious about
what legal protection they stand to lose should their terms and
conditions change.
“In the interim, Safaricom will review some of its
legal commitments to its customers and banking partners with the view of
addressing the legal exposures that could be created by the use of the
SIM overlay technology, particularly in relation to mobile banking
activities,” said Nzioka Waita, Safaricom’s director for corporate
Affairs.
Safaricom has previously said that M-Pesa users’
cash is insured up to a sum of Sh100,000 as per central bank’s
regulations. A second hurdle to the trial is the threat of the overlay
SIM cards being withdrawn within the trial period if any security
weakness is reported.
The Communications Authority of Kenya (CA) board
yesterday said it had given Finserve Kenya, an Equity Bank subsidiary,
the go-ahead to roll out its services using the technology for one year,
during which a technical audit of the trial would be conducted.
In a media briefing, also attended by Central Bank
of Kenya (CBK) governor Njuguna Ndung’u, the CA said it approved the use
of Taisys’ thin SIMs by Finserve as the cards comply with all minimum
mandatory international standards and that no evidence was presented to
warrant blocking them.
Finserve, which was given a Mobile Virtual Network
Operator licence in May, will, however, need to get approval from the
CBK to ascertain that it complies with the National Payment regulations,
Prof Ndung’u said. The approvals will allow the bank, with more than
8.7 million customers, to distribute the thin SIMs, which users would
overlay on their current SIM cards and access two different networks
using the same handset.
It also lays the ground for a battle in the mobile
money transfer business that is currently dominated by Safaricom that
has more than 19 million subscribers on its M-Pesa platform.
“Following on the outcome of (an) investigation…
the Board of Directors of the Communications Authority of Kenya has
decided that there is no sufficient evidence to block in the Kenyan
market the entry of the thin SIM,” said Ben Gituku, the CA chairman,
during the media briefing yesterday.
“During this period, we will not allow any other
thin SIM manufacturer in the market,” added Francis Wangusi, the CA
director-general. “We don’t want to create confusion or a situation
where we won’t be able to detect any security vulnerabilities on time.”
Safaricom responded by asking the CA to fast track
the security review and to publish the guidelines for the use of the SIM
cards in the interests of protecting consumers and financial
institutions who, they claim, will remain vulnerable to potential
‘man-in-the-middle’ attacks.
“If any adverse impact… is detected on account of
the use of the overlay SIM technology, Safaricom will use all prudent
and practical means to protect the confidentiality of its customers’
information and… financial transactions.”
Although Safaricom did not divulge the nature of
legal reviews it intends to take, experts said that Safaricom may warn
merchants and customers it will not bear any risks for any M-Pesa
transactions conducted on a dual SIM phone.
Safaricom, the country’s largest telecoms operator, sparked the
current battle with Equity Bank, the leading lender by customer base,
when it wrote to the telecoms market regulator on June 26 claiming that
Equity’s thin SIM technology poses a security threat to mobile
subscribers. Equity responded by saying that it intends to source the
thin SIMs from a reputable technology company, Taisys of Taiwan, which
has clients such as the International Finance Corporation — the
investment arm of the World Bank.
The approval follows several meetings with the mobile
network operators — Safaricom, Airtel, Orange and yuMobile — Taisys,
and the global association of mobile operators, GSMA on the
international best practices. Mr Gituku added that, based on the opinion
of the GSMA, save for the inherent vulnerabilities of all SIM cards,
there are no specific and confirmed vulnerabilities arising from the use
of the thin SIM.
The CA said it also found during its investigation
that no major complaints on interception of traffic of the primary SIM
card had been reported, dismissing Safaricom’s claims that the
introduction of the technology may interfere with its SIM cards and
leave its M-Pesa subscribers vulnerable to fraud.
Laboratory tests conducted on Taisys thin SIM by
China national computer quality supervising test centre as well as the
Bank Card Test Centre of China showed that it complies with applicable
international engineering and security standards.
Earlier, the GSMA had written to Kenyan authorities
warning of the risks that use of the slim SIM cards pose to the
integrity of the mobile telecommunications platforms. But the warnings
were not specific to the Taisys SIM cards.
Equity’s Finserve was granted an MVNO licence in
April alongside Mobile Pay Ltd and Zioncell. The bank expects lower
tariffs and the thin-SIM technology, which allows users to join without
leaving Safaricom, to help them break Safaricom’s grip on customers with
M-Pesa’s walled garden of services.
The bank also expects three million of its mobile
banking customers to move to its network and has begun distributing
300,000 smartphones to retailers.
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